Pillar 3a investment strategy: from defensive to aggressive
How much equity belongs in my Pillar 3a? Compando shows which equity allocation from defensive to aggressive suits which investment horizon, how strongly it moves your pension assets over 30 years and when a change of strategy is worthwhile.
1. What is an investment strategy in Pillar 3a?
An investment strategy in Pillar 3a describes how the pension money is distributed across asset classes such as equities, bonds and real estate funds. What matters here is the equity share (also called equity allocation), because it directly determines return and risk.
The equity share determines how opportunity and security are balanced:
High equity share: greater return opportunities, but stronger value fluctuations.
Low equity share: more stability and a predictable value, but lower growth.
Long-term, your strategy choice has a greater influence on the final capital than the choice of an individual provider or investment product.
2. Which investment strategies are there in Pillar 3a?
In Pillar 3a, five basic strategies have become established, from defensive to aggressive. They differ in their equity allocation and the resulting expected annual return: the higher the equity share, the greater the return opportunities and risks. In the securities solution, individual 3a providers today run up to 99 percent equities.
Strategy | Equity share | Return p.a. |
|---|---|---|
Defensive | 25 % | 2–3 % |
Balanced | 45 % | 3–4 % |
Dynamic | 65 % | 3.5–5 % |
Ambitious | 80 % | 4–6 % |
Aggressive | up to 99 % | 4.5–6.5 % |
The equity share therefore determines your later pension assets more strongly than any other decision.
Calculate your possible Pillar 3a assets
Enter your contribution, the investment horizon and the equity allocation and you immediately see which pension assets are possible by retirement. The Pillar 3a calculator shows your result in four scenarios.
3. Which investment strategy should I choose?
Three factors determine your suitable strategy: investment horizon, risk profile and life phase. The most important is the investment horizon: the longer the money stays invested, the higher the equity share can be, because price fluctuations have historically evened out over long periods. Over the years, the compound interest effect additionally amplifies the higher equity return.
Investment horizon | Suitable strategy |
|---|---|
under 10 years | 3a account, otherwise defensive |
10 to 20 years | balanced or dynamic |
over 20 years | ambitious or aggressive |
Example: Someone who contributes the full maximum contribution of CHF 7'258 per year from age 32 has, by retirement, around CHF 335'000 with a defensive strategy and an assumed 2 percent return, and around CHF 480'000 with an ambitious one and 4 percent. The difference of CHF 145'000 arises solely through the higher equity share, not through larger contributions.
You can recalculate this with your own figures in the assets calculator. More important than the highest return forecast, however, is that you stick with the strategy long-term; the tax saving remains the same for all strategies anyway.
Comparing providers pays off
Not every provider offers every strategy. The direct comparison shows you who offers which equity share and what it costs per year.
4. Changing the investment strategy: when does it make sense?
A strategy change is only worthwhile if your personal situation changes, not as a reaction to market movements. Anyone who switches strategy on falling prices realises losses and misses the subsequent recovery. Over long investment horizons, equity portfolios go through several corrections that have historically evened out again.
Sensible reasons for an adjustment are:
- retirement is approaching and the investment horizon is shortening
- your risk tolerance has changed and the comfort level no longer fits
- a withdrawal for home ownership is planned in the next few years
With increasing age, the strategy becomes step by step more defensive. This automatic transition is called the glide path. The equity share itself you adjust at any time with banks and pension apps; which investment products are available is determined by the provider. Even those who start with small contributions benefit long-term from a once-chosen strategy.
